Buy Hold Sell: Will this be a good year for ASX growth stocks?

To paraphrase Gordon Gecko, growth is good. 

But not all growth opportunities are created equal (just ask ASX tech investors right now), and after a year in which some growth stocks soared while others stalled, what's the outlook for growth this year, and how do you take advantage?

To answer those questions and more, we welcomed Anna Milne from Wilson Asset Management and Blake Henricks of Firetrail Investments to cover off all things growth stocks.

They reveal how they're handling the current market rotation, what they actually look for in growth-oriented companies and the thinking that goes into deciding when to sell.

They also each share their top pick for an ASX growth stock in 2026. 

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Edited Transcript

Chris Conway: Hello and welcome to Livewire's Buy Hold Sell. My name is Chris Conway. 2025 was a very interesting year for growth stocks. It was not a case of a rising tide lifting all boats. Some names soared whilst previous darlings floundered. So what does 2026 have in store for growth equities? To help answer that question, I'm joined by Blake Henricks from Firetrail Investments and Anna Milne from Wilson Asset Management. Big question to start off with, Anna, what's your outlook for growth stocks in 2026?

Outlook for growth stocks in 2026

Anna Milne: It's a very big question and I'd say there's a very wide path of potential outcomes here. On one hand, we have probably the most fractured geopolitical environment we've had in decades. And on the other, we have a potential incoming Fed chair who could drive interest rates a lot lower and the spill on effects of that are obviously probably going to be more positive for growth stocks than negative.

But I would say all else equal, we're actually quite positive about economic growth globally this year. But ironically, that's actually not particularly good for growth stocks. Because when economic growth is actually quite strong, it actually means there's a broadening in equity markets and cyclicals and value actually come to the fore.

Chris Conway: Blake, what about you? Outlook for growth stocks in 2026?

Blake Henricks: Broadly, I think it's tougher. But I split that into two areas. So on the one hand, you've got growth stocks in the real world or the physical world, and there I think about places like healthcare. I think that'll be okay. Where I do think it's tougher is in technology. AI at best is a neutral for many companies. For many, it's a negative. And I say it's a negative because it's going to mean increased competition.

So if you were expectations before where this company's going to raise its prices 15% forever, if there's cheaper alternatives coming through, that's going to start to challenge that. So there are definitely winners in tech out of AI. Most of those sit in the US and they're leveraged to our usage. I think most software companies probably face just a few more headwinds at the margin. So for me, the outlook for growth is tougher.

Market rotation

Chris Conway: Blake, I'll stay with you. I want to talk about this rotation that's going on in markets right now. So you mentioned some of the tech stocks, they have come off quite significantly, some down 40%, lots of money flowing into materials, commodities. How is that impacting the way you think about growth?

Blake Henricks: Well, the way we think about investing is that the market will always go to where things are getting better and usually leave where things are getting worse or staying the same. And so what we've seen is rotation into cyclicals, into resources. It hasn't actually come out of banks really. It's come a little bit out of CBA, but the other banks have been performed okay. It's really come out of growth stocks, US dollar earners. So that's where the big rotation's been. Like I said earlier, I don't think it gets a lot better for growth in the short term. So there are very selective opportunities for me, but the cyclicals is probably a better place to be.

Chris Conway: Anna, what about you? Same question. How are you looking at the rotation and how does it impact the way that you're thinking about the growth opportunity?

Anna Milne: Well, it all began in the fourth quarter of calendar year 25 when the RBA shifted from a much more dovish stance to a more hawkish stance. And not only did that impact the front end of the yield curve, but the long end as well. And growth stocks by definition really have those longer term cash flows. And so really, I guess, sensitive to changes in the discount rate. So that was really what drove the start of it.

And then it was just really bolstered by the AI concerns coming through. For us, it was quite a healthy purging in our view. There were some excesses in the market that had just gone too far. So we were, in a way, welcomed the change that occurred over the last four months or so. It's been painful if you've owned growth stocks, but if you haven't, there are definitely opportunities that are arising now.

The key metrics for growth companies

Chris Conway: We'll get to some of those opportunities. Before we get there though, I just wanted to ask some key metrics that you look at when you're looking at growth companies. What do you like to focus on?

Anna Milne: So our portfolio has a process that has three key pillars. We have the macroeconomic environment, we have fundamentals, and we have positioning. Now you can assume for growth stocks, the fundamentals are pretty sound. So maybe focusing on the other two pillars, we have the macro and the positioning. Going on from our previous conversation, I would say that the macro has to be really conducive to growth stocks for them to continue to run, particularly given the run that they've had over the last few years.

So the macro has to be conducive. And then secondly, on positioning, often growth stocks are really well-loved, they're market darlings, they're well understood and they're well held. So what is it going to take to have that incremental buyer come into the market? It's not only about meeting expectations, but beating them. So really having conviction around positioning of the market around the stock too.

Chris Conway: Blake, what about you? A couple of factors that you look at in particular?

Blake Henricks: If I look just at growth stocks, at Firetrail, we've got a view that every company has a price. But when I think about growth stocks, that doesn't always work. So if I think about growth stocks specifically, I'm thinking about revenue growth. I think that's the core of any kind of growth stock and particularly volume growth is much more highly valued for us than price growth.

But the second one is actually, it's not a metric per se, but I think this is worth asking any growth company is, "Where do you get your customers from?" If you're heavily relying on social media or search engine advertising like Google, or it's going to be AI, those kind of businesses are generally lower quality. You've got to pay to acquire every time. Other businesses where maybe it's hand-to-hand combat where you're the market leader and you've got a real edge there, or maybe it's just referrals, those are really some of the best growth businesses out there.

When to bank winners

Chris Conway: I'll stay with you, Blake. Important question right now, banking winners. So when a stock is run, what's your methodology for saying, "We'll take it there."

Blake Henricks: Yeah. So we've got three reasons for selling. The first one is a company reaches or perhaps just succeeds a bit of our valuation. The second one is we've got a better opportunity, and that does happen. If a stock's done well, hasn't quite reached their valuation, but it's always relative.

No matter how you're investing, it's what's my next best alternative. If it's way better, maybe that's time to sell. And the third one's most painful, which is a thesis breakdown. Typically, you won't be that far ahead of the market. It's a massive shock to everyone. It's very bad, and that's another time to sell. But those are the three reasons we sell.

Chris Conway: Anna, what about you? Reasons for selling?

Anna Milne: There are a couple of reasons for it. And I guess firstly, there's outright selling, and secondly, there's trimming as a position is running. And we invest on incremental information. So if a stock is up and in our view, fundamentally it hasn't changed. By definition, our total return from here is reduced and therefore it should be a lower position in our fund.

So it's really thinking about the dynamic positioning in our fund as the share price moves. When it comes to exiting, I think if there's anything that the last few years have taught us is that momentum and the pendulum of momentum can swing so much further than reality. So it's not only about reaching the intrinsic price, but reaching that point in positioning where we do believe that the buying is almost all dried up and there is going to be incremental sellers from here. So it's on the positioning side too.

Best and worst performing growth stocks in 2025

Chris Conway: And we're going to get to your stock for 2026, but I just wanted to do a little review of 2025. What was your best performing growth stock and equally your worst performing growth stock?

Anna Milne: We'll start with the best. Our best was A2 Milk and that was a bit of a turnaround story. So it was in turnaround and it really came through as an earnings growth story by the end of the year. And they proved that they could actually really succeed in what is a challenging Chinese infant milk formula environment. They could gain market share and they could grow margins.

So that has been a successful story, but there is obviously some negative ones on the other side of that. So one name for us was WiseTech and what started as, I would say, ring-fenced governance issues spilled over into execution delays. And that's when it became concerning for us, was when it was around the fundamentals and the wheels maybe falling off a little bit more than we had initially anticipated. I think it'll take a little bit to get markets trust back on that name. So that's one of our losers last year.

Chris Conway: I don't think there's any shame in that. I think a lot of investors held and might still be holding WiseTech on the way down. Blake, what about you, biggest winner, biggest loser?

Blake Henricks: I'm glad you said there's no shame because WiseTech was our biggest detractor as well.

Chris Conway: There you go.

Blake Henricks: So I won't go, but I totally agree. What started as governance, one of the big upside opportunities was container transport optimisation. This is solving one of the biggest problems in the world. It could have doubled the business. It looks like it's just a little bit harder than they thought, than the market thought. So that's definitely disappointing. On the winning side, it was Life360. We were into that fairly early and then that performed really well.

Even though it fell pretty sharply towards the back end of the year, that really delivered it. And it's one in the growth space we still like because 80% of their customers come through referrals. They're in most big markets around the world. And so yes, they're growing in the US, but they're growing around the world and they've got a few extra levers where they can beat expectations in our view. You've got pets, you've got elderly and you've got advertising. And so that's a business we still really like.

Growth stock picks for 2026

Chris Conway: That was the look back. We're now going to look forward. I've asked the guests to bring along their, not most favourite, but maybe a prospective growth stock for 2026. Blake, I'll stay with you. What have you got for us?

Fisher and Paykel Healthcare (ASX: FPH)

Blake Henricks: I've got Fisher and Paykel. So this is in the growth space, but it's in the physical world, so we don't have to worry too much about AI. When I talk about Fisher and Paykel, most people think about fridges, but they're not. They're actually in the hospital setting. And what Fisher and Paykel at its core is doing is if you go in with a respiratory illness, traditionally the way they've helped you breathe is with a full mask over your face. You've got the elastic over the top and that's giving you oxygen.

What Fisher and Paykel have got is what's called a nasal cannula. And this is a tube of oxygen that comes over here and sits here. Why this business is growing is because that's great for patients. Patients love it. They can talk. They don't get the dry throat. They can eat. It's great. And there's been a whole bunch of research done post COVID and all the respiratory issues that came then that this is non-inferior. So that's a funny term, but basically what it means, it's not worse on the face.

It doesn't have to be better, it can just be basically the same. And so that's being proven out. And so this is a business that's growing revenue just in the past year at 12%. Its earnings grew at 28% and it's on one of the lowest multiples we've seen in almost a decade. And so that's one we really like. We think they're taking a lot of market share. They're already 90% market share and 90% of the revenue in the hospital space is coming from those consumables, which is much more recurring. Great business.

Chris Conway: So Fisher and Paykel for you. Anna, bring us home. What's your growth opportunity for 2026?

REA Group (ASX: REA)

Anna Milne: My growth opportunity is REA Group, ticker is REA. It's up $200. It's a standard deviation below its long-term valuation and it's at a price where some maybe thought it wouldn't come back to. And the reason for that, and it is the same for most of the classifieds is that it's been shoot first and ask later when it comes to AI. So the marketers shot the bullets and now we're scrambling to work out, I guess, the real impacts of AI. And we've come through this and decided that we're pretty comfortable with where REA sits.

They are clearly a market leader. Over 90% of their traffic is organic to their site. They're far outspending both their domestic peers and their peers internationally and just looking out over calendar year 26, they have a really strong outlook fundamentally when it comes to listings growth, to yield and to margin unto their new CEO, Cam McIntyre. So overall really we're very positive on REA. We think scrolling real estate is an Australian pastime.

Chris Conway: Sure is.

Anna Milne: And that's not changing anytime soon.

Chris Conway: And an interesting choice. I would say over the last 12 months of the managers that I spoke to, that REA Group was the stock that they all said if it pulled back to a nice price, that's the one that they'd buy. So obviously you guys are thinking the same thing. If you enjoyed that episode of Buy Hold Sell, make sure to give it a like and don't forget to follow our YouTube channel. We're adding lots of great content every single week.